What is this thing called 9Stucks?
9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

5 Pesky Plights Hurt a Family Business (Part 4): The Bubble

Bubble

I recently returned from my college reunion… swept back in time to the days when living in my college bubble was a secure yet liberating environment.  Those were happy personal times – times of discovery, growth, socialization, and empowerment.

Based on my experience working with ‘stuck’ companies, executives caught in a company bubble might not be having as much fun. Operating in a company bubble suggests you are isolated, cut off from outside perspectives.  Is your company operating in a bubble?

This is Part 4 in my multi-part series that explains how 5 particularly disabling conditions can exacerbate family business underperformance.

If there is a weak independent board of directors/advisors, or one doesn’t exist, then governance and decision-making at the top of a family owned company is concentrated and insulated.  Due to the historical, generational ownership structure, there is a tendency that a family business could be prone to operate in its own unique bubble. If this is the case, does the addition of weak governance to the mix cause a family company to live in a double bubble?

What’s the significance of the ‘no governance’ topic? Many privately-held companies do not have any formal board of directors/advisors.

I’ve seen first hand where the lack of solid governance makes a difference. Similar to the other issues covered in this ‘Pesky Plights’ series, the absence of good external, independent governance could have negative implications on company execution.  Weak or no governance may prevent the family shareholders from facing up to and dealing with a myriad of challenges within their company.  Carefully assembled boards bring accountability, seasoned advice, realism, objectivity, innovative ideas and often inspiration.

Consider the situation at an established – but flat and stuck – family-owned manufacturing company with no outside board (let’s call it BubbleCo).

[Read more…]

What is this thing called 9Stucks?
9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

5 Pesky Plights Hurt a Family Business (Part 3): The Handoff

HandoffI ran outdoor track both in college and high school. Since I was a fast runner (back in the day) I always ran one of the legs of the 4×100 and 4×200 relay teams. Our relay teams practiced daily on perfecting the handoff – passing the baton. We had the relay leg transitions down pat. Unfortunately family owned businesses may not plan for a leadership transition and may bungle, delay or simply avoid the handoff to the next generation of family leaders or to non-family executives.

This is the mid-point in my multi-part series that explains how 5 particularly disabling conditions unique to a family business can exacerbate business underperformance.

This post is about companies with non-existent succession/transition plans. When owners can’t or won’t let go, four of the 9Stucks (Ditch, Moment, Slow Lane, and Another World) get really amped up and push the stuck company into a deeper hole.

Family company leaders often stay in their roles too long.  But staying too long is not the problem; being in a zone of leadership indecision creates troublesome ripples throughout the entire company.

FamilyCo was one of my stuck manufacturing clients. I was hired by the company/family to do a ‘fresh eyes’ assessment of their business. The company wasn’t in trouble but it had hit a wall and was stagnating. It didn’t take me long to figure out there were issues with the senior team, the company’s competitive position and a number of important operational functions.

Some facts:

  • Jack (second generation) was the CEO and the son of the founder; at age 70 he worked full time at FamilyCo
  • Jack’s 2 children (son and daughter) both worked for the company. The son (Bill, age 42) ran operations (manufacturing and engineering). The daughter (Susan, age 40) was head of marketing. Bill and Susan worked well together.
  • Sales was led by a non-family member and he reported directly to Jack. In the last few years, the sales team had experienced significant turnover.
  • The CFO was also a non-family member and had worked for Jack for many years. He was nearing retirement. His duties included many administrative functions and human resources.
  • There was no Board of Directors/Advisors

The children told me: “Dad was the driving force to get the company to where it is today, but now we think he has blinders on; he doesn’t acknowledge all the changes in the industry, the shifting customer demands or the need to upgrade our facilities, systems and equipment. He is living in the past. You (me) need to talk to him about letting us run the company.”

Okay…now what?

[Read more…]

What is this thing called 9Stucks?
9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

5 Pesky Plights Hurt a Family Business (Part 2): The Strategy Freeze

PolarBearsFightingInnovate and grow or maintain the status quo?

The process of making this basic strategic choice can be an exciting journey forward, or a source of conflict in a family-owned company.

Why? What causes a family company to be frozen in its tracks over this fundamental question? And what can be done to thaw the ice, or better yet, prevent the business from becoming Stuck in the Moment?

You may be thinking…’Conflict among the shareholders of a private company over strategic direction is common and good.’ You’re right! Debate over the best go-forward strategies and tactics can be healthy and productive. In companies that are not family owned, the conflict tends to resolve itself in a timely and orderly way. This is especially true in companies with outside institutional investors who don’t tolerate indecision for extended periods of time.

In some family-owned companies, the strategic discord festers and lingers. A ‘strategic fog’ permeates the boardroom, family gatherings and the company’s hallways and cubicles. Critical decisions are delayed and significant opportunities ignored. The disagreement can go dormant but then suddenly explode. This can be debilitating to the business and to the shareholders.

What has always intrigued me is not the presence of a rift over the strategic direction of a family business. My question is why the conflict becomes so pervasive and common.

My experience points to 10 ingredients:

  1. History and nostalgia
  2. Personality traits of the family shareholders
  3. Knowledge disparity
  4. Background noise
  5. Breakfast table scrambled eggs
  6. Cash (see Part 1 of this series – The SeeSaw)
  7. Mood of the day: comfort, fear, fatigue, ambivalence
  8. Age
  9. Lack of trust
  10. The family stew – a simmering salmagundi of any of the above

P.S. #’s 8 and 9 are smokescreens [Read more…]

What is this thing called 9Stucks?
9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

5 Pesky Plights Hurt A Family Business (Part 1): The Seesaw

SeesawFamily-owned companies are plentiful in number and unique in character. Like any other type of company, these businesses are not immune to being infiltrated by the 9Stucks. In fact, a family business is fertile breeding ground for a unique 9Stucks mix that is often configured with a twist and a flair for the dramatic.

One blog post can’t do justice to these ‘pesky plights’ so I’ve created a 5-part series. Each post describes one misstep of family business leadership that can exacerbate the 9Stucks.

  1. Family needs vs. business needs: They are strikingly out of balance. (This is Part 1: The Seesaw)
  2. Strategic direction is stymied: Conflict over growth vs. maintaining the status quo freezes the business in its tracks. (Part 2: The Strategy Freeze)
  3. Transition/succession plan is non-existent: The owners can’t or won’t let go. (Part 3: The Handoff)
  4. Governance and decision-making at the top is concentrated and insulated: There is a weak independent board of directors/advisors, or one doesn’t exist. (Part 4: The Bubble)
  5. Sacred cows graze in the company’s organizational pasture: Top leadership spots are based on birthright or longterm ‘family favorite’ status rather than skills. These sacred cows crowd out talented non-family leaders. (Part 5: The Sacred Cows)

One caveat: This series is not intended to be a detailed discussion of all the intricacies and nuances related to management of a family owned business. There is considerable published content focused on all aspects of the family business: research, writing, business groups, websites, and magazines.

I simply want to help identify and evaluate these 5 disabling conditions – and suggest ways to get rid of them.

[Read more…]

What is this thing called 9Stucks?
9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

Bring On The Stuck Company Cast

AdmitOneTicket9Stucks is a business diagnostic tool that identifies nine distinct yet interrelated business challenges that cause a company to underperform and restrict innovation. The 9Stucks are patterns…recurring conditions I’ve seen and experienced fixing stuck businesses for the last 20+ years. These 9Stucks are real, not theoretical.

One reader of the 9Stucks blog said to me: “I may be stating the obvious, but when I think about your 9Stucks, I think about PEOPLE. Don’t the people in a company have a big impact on creating, causing or maintaining all of the stucks?”

Hmm, good catch…

People are the driving force behind the 9Stucks.

They are the actors and actresses who have leading and supporting roles in an organization’s stuck performance, a performance that can carry the same degree of drama as any stage play.

Introducing the  Stuck Cast.

Where can you find the members of the Stuck Cast in your company? Do they slink and slither about, hide in cubes, lurk around the kitchen area, or are they right there in front of you?  Or are they…you?

The members of the Stuck Cast are not diabolical. They are not co-conspirators (well, maybe some are…). They are not sitting around your conference room table reviewing a script entitled: “30 Sure Fire Techniques That Will Make Our Company Stuck”.

They don’t need to prepare for their roles because these players are out and about just doing what they do every day:

  1. causing or creating the stucks
  2. enabling the stucks
  3. maintaining the stucks
  4. being clueless about the stucks
  5. fixing the stucks

Do you recognize any of the following cast members? [Read more…]

What is this thing called 9Stucks?
9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

Quick! Exit! Uh…not so fast

Exit Planning is a trendy topic, especially for owners of stuck companies who often develop the itch to sell their business when raw emotions push aside rational thought.

Exit Planning means helping prepare the company and shareholders for an ‘exit event’ (aka Sale).

The idea of “It’s time to sell the business” becomes more top of the mind when the owner(s) of a stuck company grow weary of dealing with their own personal collection of stucks. Here are some points of frustration…

Since I have been asked about Exit Planning/Selling a business frequently in the last couple of months, I thought I would share an email I wrote to the CEO of a stuck company who was contemplating selling.  Here goes:

[Read more…]

What is this thing called 9Stucks?
9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

How Scrooge and Marley Became Unstuck

Scrooge and Marley PLC was stuck.

I don’t identify my clients by name, but given the widespread publicity and overall notoriety of this particular company, I felt it would be beneficial to reveal the real ‘story behind the story’. This is a case study about how Scrooge and Marley PLC became unstuck.

Background

Scrooge and Marley was a mature, privately-held ‘counting house’. The company was founded by Jacob Marley and Ebenezer Scrooge, two aggressive, entrepreneurial clerks. There were no outside investors and no cash awards from any business accelerator programs. (Hard to imagine who might have wanted to hear their elevator pitch!)

What is a ‘counting house’? Marley called their business a ‘money-changing hole’. It was a closely held, secretive financial institution that charged high interest rates on all transactions. They were loan sharks…predatory lenders operating out of a dingy warehouse. It’s a good thing their home office was in London, otherwise they probably would have been targeted by Dodd-Frank or The Consumer Finance Protection Bureau.

Jacob Marley died while he was still employed at the company. There was no key man life insurance; they were too cheap to buy a policy. After Marley’s death, Scrooge became the sole shareholder and he decided to run Scrooge and Marley as he saw fit.

Little did Scrooge know that Jacob decided to maintain a Board observer role.

[Read more…]

What is this thing called 9Stucks?
9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

CEOs: How To Deconstruct A Stuck Company Stew

Is your company’s value ebbing or declining?

Do you know ALL the reasons why your company is underperforming, or can you only pull apart some of the reasons?

Figuring out why shareholder value is deteriorating can be easy if the issues are really obvious. It can be hard and confusing if the overall situation is a quagmire.

The 9Stucks collection identifies the most common causes of why a company isn’t meeting shareholder expectations. For those of you who have looked at the 9Stucks, each standalone Stuck is straightforward and uncomplicated. Most of the significant, contributing issues that cause a company to be stuck are not hard to uncover if you know where to look.

However, the 9Stucks are usually not limited to just one or two. A stuck company always has A COLLECTION of the 9Stucks. The breadth of the collection determines the overall organizational ‘stickyness’.

This tangled, unique mix of the 9Stucks acts as a significant impediment to figuring out the real, challenging issues in the organization because it is often difficult to extricate and isolate the individual components of the mix, let alone fix them.

I call the mix Stuck Salmagundi.

Salmagundi…?

[Read more…]

What is this thing called 9Stucks?
9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

CEO: Does Your Team Have Control of the Ball?

The team watching the ball slip away...

“The only players who survive in the pros are the ones able to manage all their responsibilities.” – Tom Brady, Quarterback of the New England Patriots

Football, rugby, or any other sport organized around a finely-tuned playbook, requires players to understand roles and execute plays in both familiar or unplanned situations. Each player has defined roles and responsibilities based on his skills; that player is fully aware of his role, the roles of others and has studied the plays. A solid playbook enables a cohesive team to maintain control of the ball and win.

Does your company’s playbook have:

This all too common, weak people/process combination creates lots of broken plays. Basic things like roles, skills, processes really should be a given in any organization.

But if that’s what’s ‘supposed to be’, then why have I regularly seen many corporate fumbles, pigpiles, tangled situations and outright conflict over ‘who does what and how’?

[Read more…]

What is this thing called 9Stucks?
9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

How To Boost Cash Flow: 11 Recommendations That Worked

Want more Benjamins? Read below.

BuildingCo was constantly in a cash crunch.

The company manufactured a line of building products, had one production facility that supplied 12 regional warehouse/distribution centers and was founded by two entrepreneurs. BuildingCo was well positioned in a steadily growing (at the time) geographical region of the US. To help fund the company’s growth, management used a combination of outside capital from 2 private equity groups, mezzanine and senior debt.

However, as the velocity of growth accelerated, the company regularly bumped up against their line of credit availability.

They were running on cash fumes.

Pete, the CEO/Co-Founder, grew weary of his company’s cash flow problem. He had a simple solution…get a new slug of equity into the business from the 2 private equity funds and BuildingCo would be free from their growth shackles.

Sounds like an easy solution. Draw up the paperwork.

However, the private equity guys ‘suggested’ a different approach to Pete.

[Read more…]